Mastering US stocks! How does Buffett analyze financial reports to identify quality stocks? Gross margin: Gross profit/Revenue | >40% SG&A expenses as a percentage of gross profit: SG&A/Gross profit | <30% R&D expenses as a percentage of gross profit: R&D/Gross profit | <30% Depreciation as a percentage of gross profit: Depreciation/Gross profit | <10% - Interest as a percentage of operating income: Interest/Operating income | <15% Taxes as a percentage of pre-tax income: Taxes/Pre-tax income | Aligns with corporate tax rate Net income as a percentage of revenue: Net income/Revenue | >20% Earnings per share (EPS) growth: Year 2 EPS/Year 1 EPS | Shows positive growth